The government today announced setting up an Advisory Group on International Taxation and Transfer Pricing, which is to be headed by Revenue Secretary R S Gujral.

The Advisory Group has been constituted by the Central Board of Direct Taxes, the Finance Ministry said in a statement.

Besides CBDT Chairman Laxman Das, Som Mittal of NASSCOM, P Y Gurav of CII, Dinesh Kanabar of FICCI, Ved Jain of ASSOCHAM, Mahesh P Sarda of ICAI, T P Ostwal of IFA and Mukesh Butani of ICC have been named as members of the Board.

The transfer pricing mechanism is often misused by multinational companies to transfer profits to their subsidaries in low tax countries.

A report of Global Financial Integrity says that major channel for illicit outflow is transfer of funds through mispricing which accounts for 77.6 per cent of total illicit outflows.

According to Finance Minister Pranab Mukherjee, the existing transfer pricing provisions of the government, which were introduced "are not detailed provisions as compared to transfer pricing provisions of developed countries".

It was felt that there is a need to upgrade these transfer pricing provisions to meet the challenges of growing intangible economy and various complex cost sharing arrangements, a document of the ministry said.

A committee by DGIT (International Taxation) was constituted to look into the issue of revising the transfer pricing provisions. The committee has already submitted its interim report which is under consideration.